Wet Argentine weather keeps markets guessing about soy crop

Argentina's soy output hinges on whether waterlogged fields get enough sun in the weeks ahead to make them plantable, allowing the grains powerhouse to provide the supply jolt needed to cap soaring world food prices.

Heavy storms in recent months have turned swaths of the Pampas grains belt into unplantable mush. No immediate relief is in sight as fresh showers fell on Sunday and more are expected. The bad weather follows weak harvests in fellow breadbaskets Russia and the United States, which have squeezed grain prices higher as fast-growing world food demand goes unslaked.

With benchmark Chicago soy futures up 26 percent in 2012, all eyes are on South American producers such as Argentina, t he world's No. 3 soybean exporter and No. 1 supplier of byproducts such as soyoil and soymeal.

"Weather conditions remain very unstable," Argentina's national SMN weather service said on Monday, predicting scattered storms from Tuesday to Thursday.

The showers - the strongest of which are expected on Wednesday - will dump another 70 to 90 millimeters in farm areas of Buenos Aires, Cordoba, Santa Fe and Entre Rios, the SMN said.

Estimates for the country's 2012/13 soy harvest, which should start in March, vary wildly. Government officials have said they expect a crop of 55 million tonnes or more while worst-case private estimates reach down to 45 million tonnes. "The climate over the next two weeks will be decisive," said Gabriel Perez, director of the Mercampo consultancy, who forecasts a 2012/13 soy crop of about 47 million tonnes.

One thing everyone agrees on is that soy crop yields are suffering from widespread flooding in the key farm province of Buenos Aires, caused by an August-to-October wet spell and sustained by more moderate rainfall since then.

Pablo Adreani of the Agripac consultancy said until he sees what January and February weather is like, his soy forecast remains wide open at 45 million to 55 million tonnes.

"If it doesn't rain over the coming two weeks, growers could still plant all the areas they had planned to seed," he said. Consumer nations hope the Argentine storms let up so farmers can speed the country's wheat harvest and get optimum amounts of 2012/13 soy and corn into the ground, figuring that ample supply from the South American country could help soften global prices.

While the United States Department of Agriculture (USDA) sees a whopping 81-million-tonne soy crop from Brazil this crop year, weather uncertainty in Argentina is part of a global scenario that points toward further food price volatility in 2013, says the United Nations FAO food agency.

High grain prices not only increase hunger and instability in poor parts of the world, they fuel inflation in developed countries as well, making it harder for central banks to spur growth and fight unemployment by keeping interest rates low. The USDA forecasts Argentina's 2012/13 soy harvest at what would be a record 55 million tonnes. In October an Argentine government official also put the estimate at 55 million tonnes or even 58 million, depending on the weather.

So far the government has declined to lower the estimate, even as floods slow the pace of soybean planting by 9.6 percentage points versus last year's seeding tempo, according to the Buenos Aires Grains Exchange.

"The harvest forecast will be modified, but not by as much as many believe," Deputy Agriculture Secretary Oscar Solis told Reuters last week.

Argentina's upcoming soybean harvest is seen at 53 million tonnes, the Rosario grains exchange - located at the country's main grains shipping hub on the Parana River - said on Friday in its first output forecast for the crop.

Last season, the Agriculture Ministry says Argentina's drought-hit crop came in at 40.1 million tonnes.

Marginal growth in soy planting area - to 19.4 million hectares this season from 18.7 million in 2011/12 - is not enough to make up for losses being caused this year by excessive rain, some private analysts say. Argentina's soy take hit a record of 52.7 million tonnes in the 2009/10 crop year.

"Considering that we've never had a 55-million-tonne soy harvest before and that planting area has not expanded much, how could we get to 55 million in a year that has had less than ideal weather?" said farm consultant Manuel Alvarado Ledesma, who estimates output of 48 million to 50 million tonnes.

He said harvesting will be put off for an average 15-20 days this season due to delayed planting in flooded parts of Buenos Aires province, the country's top soy-producing region.